Opinion
3:18-cv-01904-YY
09-20-2021
UNITED STATES OF AMERICA, Plaintiff, v. KAREN J. PARK, Defendant.
FINDINGS AND RECOMMENDATIONS
YOULEE YIM YOU UNITED STATES MAGISTRATE JUDGE
FINDINGS
The United States (the “government”) brings this action pursuant to 26 U.S.C. § 7401 and § 7402(a) seeking to reduce to judgment federal income tax assessments against defendant Karen J. Park (“Park”) for tax years 2005-2013 and 2017. Compl., ECF 1. The government seeks an entry of judgment for $259,589.81 (with interest calculated through June 27, 2020), plus interest and statutory accruals after that date. Mot. 2, ECF 25 (citing 26 U.S.C. §§ 6601, 6621, and 6622).
The government filed a motion for summary judgment asserting there are no genuine issues of material fact regarding Park's tax liability and the government's entitlement to have Park's tax assessments reduced to judgment. Mot., ECF 25. The court has considered the parties' briefing, as well as oral argument. The court also accepted supplemental briefing to help clarify the issues.
For the reasons discussed below, the government's motion for summary judgment should be GRANTED.
I. Summary Judgment Standard
Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The party moving for summary judgment bears the initial responsibility of informing the court of the basis for the motion and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party does so, the nonmoving party must “go beyond the pleadings” and “designate ‘specific facts showing that there is a genuine issue for trial.'” Id. at 324 (citing Fed.Rule.Civ.P. 56(e)).
In determining what facts are material, the court considers the underlying substantive law regarding the claims. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). Otherwise stated, only disputes over facts that might affect the outcome of the suit preclude the entry of summary judgment. Id. A dispute about a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248-49. The court “does not weigh the evidence or determine the truth of the matter, but only determines whether there is a genuine issue for trial.” Balint v. Carson City, Nev., 180 F.3d 1047, 1054 (9th Cir. 1999). “Reasonable doubts as to the existence of material factual issue are resolved against the moving parties and inferences are drawn in the light most favorable to the non-moving party.” Addisu v. Fred Meyer, 198 F.3d 1130, 1134 (9th Cir. 2000) (citation omitted).
II. Factual and Statutory Background
The government seeks an entry of judgment against Park regarding the federal taxes she failed to pay for tax years 2005-2013 and 2017. Mot. 3, ECF 25. The government's assessment of Park's tax liability is based on the joint returns she filed with her former husband prior to their divorce, and the individual returns she filed thereafter. Id. As the government accurately observes, “Park state[s] no objection to the United States being granted summary judgment for the 2007 through 2013 tax years, and the 2017 tax year.” Reply 2, ECF 28. Nor does Park “deny that the tax liabilities for 2005 and 2006 were properly assessed [and] that she has never paid them.” Id. at 1. Thus, “the only question before the Court is whether the statutes of limitations for the 2005 and 2006 tax liabilities were tolled such that the United States' October 31, 2008 filing of the Complaint in this suit was timely.” Id. at 2.
In their briefing, the parties also discuss other issues, e.g., Park and her former husband's requests for an installment agreement; however, it is not necessary to address those issues to resolve the government's motion for summary judgment and the parties do not argue otherwise.
Under the Internal Revenue Code, the statute of limitations for collection of a tax is ten years after the assessment of the tax. See 26 U.S.C. § 6502(a); United States v. Kollman, 774 F.3d 592, 595 (9th Cir. 2014) (“the government may collect that tax ‘by levy or by a proceeding in court' . . . within ten years after the assessment of the tax”). This ten-year period “is called the Collection Statute Expiration Date (or ‘CSED').” United States v. Denkers, No. C 09-03403 WHA, 2010 WL 1267063, at *6 (N.D. Cal. Mar. 29, 2010), opinion vacated in part on reconsideration, 2010 WL 3249398 (N.D. Cal. May 25, 2010), and opinion reinstated on reconsideration, 2010 WL 3219187 (N.D. Cal. Aug. 13, 2010). However, the CSED may be extended beyond ten years where a taxpayer submits an offer-in-compromise. See 26 U.S.C. 6331(k)(1); see also United States v. Murdock, No. 3:19-CV-0083-HRH, 2020 WL 5552112, at *3 (D. Alaska Sept. 16, 2020) (“The IRS cannot levy a tax while an offer-in-compromise is pending[.]”) (citing 26 U.S.C. § 6331(k)(1)).
An offer-in-compromise is “effectively an offer to settle a tax liability, in which a taxpayer offer to pay a portion of the tax liability, and the IRS agrees to accept that payment in lieu of attempting to collect the full amount of the outstanding liability.” Mot. 5, ECF 25 (citing 26 U.S.C. § 7122 and 26 C.F.R. § 301.7122-1).
Here, the IRS assessed Park's 2005 tax liability on October 1, 2007, and her 2006 tax liability on September 24, 2007, which would make October 1, 2017, the CSED for the 2005 taxes and September 24, 2017, the CSED for 2006. Although the government filed its Complaint in this action on October 31, 2018-well beyond the ten-year CSED for 2005 and 2006-the parties agree that the CSED for both years was tolled when Park submitted an offer-in-compromise to the IRS in March 2008 to settle her outstanding tax liability. Id. at 4-5. To submit an offer-in-compromise, Park completed and signed Form 656, which explained the tolling period as follows:
. . . (e) I/We understand that the statute of limitations for collection will be suspended during the period an offer is considered pending by the IRS (paragraph (k) of this section defines pending).
. . . (k) The offer is pending starting with the date an authorized IRS official signs the form. The offer remains pending until an authorized IRS official accepts, rejects, returns, or acknowledges withdrawal of the offer in writing. If I/we appeal an IRS rejection decision on the offer, IRS will continue to treat the offer as pending until the Appeals Office accepts or rejects the offer in writing.”Haydn Decl., Ex. 2, ECF 26-2 (emphasis added). Consonant with these provisions, the parties agree that the tolling started on April 17, 2008, the date on which an authorized IRS official signed Park's Form 656. See id.; see also Mot. 10, ECF 25. The parties also agree that the following occurred after Park submitted the offer-in-compromise: (1) the offer was initially rejected by the IRS on August 19, 2008; (2) Park filed a timely appeal of that rejection on
September 18, 2008; (3) an IRS “Appeals Settlement Officer” wrote a letter to Park on February 26, 2009, stating, “I must sustain the rejection of the offer in compromise, ” and offering Park the opportunity to “request mediation or arbitration”; and (4) an IRS “Appeals Team Manager” wrote a letter to Park on July 6, 2009, stating “your offer rejection is sustained . . . [w]e must therefore ask you to pay your account in full as soon as possible.” Mot. 6-7, ECF 25.
III. Discussion
Citing the language of Form 656, Park argues that the tolling period for the 2005 and 2006 CSED ended when the Appeals Settlement Officer wrote to her on February 26, 2009. Resp. 7, ECF 27. The government counters that the tolling period ended when the Appeals Team Manager wrote to Park on July 6, 2009. Mot. 11, ECF 27. Under Park's end date, the CSED tolling period for 2005 and 2006 was 304 days; under the government's end date, the tolling period was 434 days. See id.; see also, Resp. 7, ECF 27. The different calculations are illustrated as follows:
Park's tolling calculation: The government's tolling calculation:
To establish the correctness of the July 6, 2009 end date, the government has submitted IRS Form 4340, “Certificate of Assessments, Payments, and other Specified Matters, ” which includes the following entries for tax year 2005 and tax year 2006 (with references to Park's “OIC, ” i.e., offer-in-compromise): 04-28-2008 Processable OIC Pending 07-06-2009 Currently Not Collectible Hardship Status 07-06-2009 Processable OIC No. Longer Pending Because Returned or Rejected Haydn Decl., Ex. 1, ECF 26-1. And, as the government points out, “official IRS Forms, such as Form 4340, are ‘entitled to a presumption of correctness.'” Ohlinger v. United States, No. CV-18-04185-PHX-DJH, 2020 WL 7412220, at *8 (D. Ariz. Oct. 30, 2020) (quoting Palmer v. IRS, 116 F.3d 1309, 1312 (9th Cir. 1997)). Therefore, the government argues, unless Park “provides admissible evidence to the contrary, the Court looks to Form 4340 to determine the operative dates that an offer-in-compromise was pending.” Id.; see also United States v. Meehan, 530 F. App'x. 155, 156 (3d Cir. 2013) (holding that the offer-in-compromise dates on Form 4340 established that an offer-in-compromise was pending on those dates).
Park acknowledges that Form 4340 lists July 6, 2009, as the end date for her 2005 and 2006 CSED tolling periods, and she concedes that Form 4340 is “sufficient to establish that notices and assessments were properly made by the IRS.” Resp. 4, ECF 27 (citing Hansen v. U.S., 7 F.3d 137 (9th Cir. 1993). Park insists, nonetheless, that the “Appeals Settlement Officer” who signed the February 26, 2009 letter had the authority to reject an offer-in-compromise, and argues that the July 6, 2009 letter from the Appeals Team Manager was simply “reiterating that the Appeals Office had sustained the rejection” and “does not change the fact that the [offer-in-compromise] was no longer pending . . . when the Appeals Office sent the first letter on February 26, 2009.” Resp. 7, ECF 27 (emphasis added). Park cites the Internal Revenue Manual (“IRM”) to support her argument, but the provision she relies on actually authorizes “Appeals Team Leaders” and “Appeals Team Case Leaders” to reject offers-in-compromise and does not, in fact, delegate any such authority to Appeals Settlement Officers. See Park Decl., Ex. 16, ECF 27-17; see also IRM, § 1.2.2.6.1.2(5). Further, as the government points out, the IRM clearly differentiates between the role and authority of a “Settlement Officer”-like the one who signed the February 26, 2009 letter-and an “Appeals Team Case Leader”-like the one who signed the July 6, 2009 letter. Id. at §§ 8.1.3.5, 8.1.3.6. The IRM also clearly states that the authority of a Team or Case Leader to reject an offer-in-compromise “may not be redelegated.” Id. at § 1.2.2.6.1.2(30). Given this clear delineation of roles and the presumptively correct dates in Form 4340, Park's argument that the February 26, 2009 letter constituted an authorized rejection that ended the tolling period for tax years 2005 and 2006 is simply not persuasive. See Resp. 9, ECF 27.
The formal title of the Appeals Team Manager who signed the July 6, 2009 letter to Park does not perfectly match the titles listed in the version of the IRM that Park submitted. See Park Decl., Ex. 16, ECF 27-17. However, the 2018 IRM uses the same title, “Appeals Team Manager”; thus, there is little question they refer to the same position, and Park does not argue otherwise. See Resp., ECF 27; see also IRM § 1.2.44.2.2(5), Delegation of Authorities for the Collection Process (05-19-2007).
Park's arguments concerning a recent release of lien against her personal residence are likewise unavailing. Park points to an IRS Certificate of Release of Federal Tax Lien (“RFTL”) for tax years 2005 and 2006 that was recorded on March 30, 2021, and argues that the RFTL bolsters her claim that her “tax liability for those years has become legally unenforceable due to the expiration of the CSED.” Def.'s Supp. Br. 4, ECF 32. Park explains that, under 26 U.S.C. § 6321, a lien imposed pursuant to an assessed tax continues to stay in place “until the liability for the amount so assessed . . . is satisfied or becomes unenforceable by reason of lapse of time.” Id. at 2 (citing 26 U.S.C. § 6322). Park reasons that, because she clearly has not satisfied her 2005 or 2006 tax liability, the only logical explanation for the March 2021 RFTL is that the IRS must have determined that the CSED passed for 2005 and 2006, thereby rendering the liability for those tax years “unenforceable.” Id.
Another logical explanation for the RFTL, however-and the one credibly provided by the government-is that the lien was released in error and had nothing to do with Park's 2005 or 2006 tax liability or the CSED for either year. Instead, the government explains, the March 2021 RFTL was likely recorded in error because the original lien listed both Park and her former husband as lienors, and “when the lien for [former husband's] liabilities was validly released, it was not noticed that the Notice of Federal Tax Lien, post-mirroring, related to two separate sets of liens (those related to Ms. Park, and those relating to [former husband]).” Pl.'s Supp. Br., ECF 33; Andray Decl. 2, ECF 33-1. The government further explains that the IRS corrected its erroneous lien release pursuant to 26 U.S.C. § 6325(f)(2) and recorded a “partial revocation” of the RFTL on August 9, 2021. Id. The revocation was “partial” because “the Certificate of Release of Lien was only revoked as to the release of Ms. Park's liens, it was not revoked as to the release of [former husband's] liens.” Andray Decl. 2, ECF 33-1.
Even if the March 2021 RFTL had not been partially revoked, the government argues, the RFTL would still be “irrelevant to Park's liability for the taxes claimed in the Complaint” because “the release of a tax lien does not affect the tax liability or the United States' ability to get a judgment as to that liability.” Id. at 4-5. Indeed, “[i]t is well settled that although a certificate of tax lien release is conclusive that the lien is extinguished, it is not conclusive that the tax liability is extinguished.” Boyer v. Comm'r, 86 T.C.M. (CCH) 615, *3 (T.C. 2003)) (emphasis in original). Park herself acknowledges that the “plain language of § 6325(f)(1)(A) and of the RTFL clearly shows that the release extinguishes the tax lien, not the tax liability.” Def.'s Supp. Br. 3, ECF 32 (citing Boyer, 86 T.C.M. (CCH) 615, at *3) (emphasis added).
Additionally, Park does not contest that “the certificates of release have no effect on the underlying tax liability, ” even when tax liens for certain tax years “have been extinguished.” United States v. DeTar, No. 1:04-CV-749, 2009 WL 2252822, at *1 (W.D. Mich. July 28, 2009). Therefore, even looking at the evidence in the light most favorable to Park, it is not possible to conclude that the March 2021 RFTL eliminated or rendered unenforceable her 2005 or 2006 tax liability. See United States v. Smith, No. CV10-2358-PHX-DGC, 2012 WL 2317770, at *9 (D. Ariz. June 18, 2012), aff'd, 595 Fed.Appx. 719 (9th Cir. 2015) (finding that neither the release of a tax lien nor the non-renewal of an expired tax lien had any impact of the question of the defendant's tax liability); Boyer, 86 T.C.M. (CCH) 615 at *3 (“Because the tax was not paid in full, nor did the statutory period for collection expire, petitioner's 1986 and 1987 tax liabilities were not extinguished [by the RFTL].”).
The court acknowledges that the timing of the government's supplemental briefing afforded Park no opportunity to respond to the information concerning the IRS's August 9, 2021 partial revocation of the RFTL. The court also acknowledges Park's request that the court allow additional briefing and that “discovery be re-opened to allow discovery related to the RFTL for 2005 and 2006 and any subsequent action by the United States related to the RTFL.” Def.'s Suppl. Br. 2, ECF 32. The parties, however, were provided additional time to submit supplemental briefing on the RFTL, and the law is clear that the RFTL-revoked or not-has no bearing on Park's tax liability for 2005 and 2006. Therefore, additional briefing would be unnecessary and futile.
In sum, the government has shown, as a matter of law, that the statute of limitations for tax year 2005 and 2006 did not expire before its Complaint in this action was filed on October 31, 2018. Put differently, no reasonable juror could find that the Appeals Settlement Officer who sent the February 26, 2009 letter to Park was authorized to reject her offer-in-compromise, or that the release of lien created an issue of fact regarding Park's liability. See United States v. Kidwell, No. CV 2:16-433 WBS EFB, 2017 WL 714381, at *5 (E.D. Cal. Feb. 23, 2017) (finding “the Forms 4340 list the dates that there was a pending offer-in-compromise and defendant has not created a triable issue of material fact as to the tolling or expiration of the statute of limitations, ” holding the government “filed the action before the statute of limitations expired, ” and granting the government summary judgment); Smith, 2012 WL 2317770, at *17 (granting the government summary judgment despite recordation of a tax lien release and expiration of a tax lien). Thus, the government is entitled to entry of judgment against Park.
RECOMMENDATIONS
The government's motion for summary judgment (ECF 25) should be GRANTED, and a judgment for Park's federal income tax assessments should be entered in the amount of $259,589.81 (with interest calculated through June 27, 2020), plus interest and statutory accruals after that date.
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Monday, October 04, 2021. If no objections are filed, then the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement.
NOTICE
These Findings and Recommendations are not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any Notice of Appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of a judgment.